Thursday, December 9, 2010

President Obama's Tax Deal Is A Good Play

In my Net surfing today, it appears that slowly but surely there are some who have stopped hyperventilating about the tax increase for the wealthy long enough to recognize that the President's compromise gets a lot more than it gives. (Check out the Daily Kos for example) Sure it extends the Bush tax cuts for the wealthy for an additional two years but it doesn't make them permanent. In exchange, here's what we, the people get:

Working families will not lose their tax cut. A typical working family faced a tax increase of over $3,000 on January 1st. The framework agreement includes a mutually agreed upon solution to the impasse over taxes by extending the 2001/2003 income tax rates for two years and reforming the AMT to ensure that an additional 21 million households will not be hit with a tax increase.

$56 billion for unemployment insurance extension. According to the Council of Economic Advisers, passing this provision will create 600,000 jobs in 2011 alone.

$120 billion payroll tax cut for working families

$40 billion in tax cuts for our hardest hit families and students

100% expensing for businesses next year

Child Tax Credit: The $1,000 child tax credit will be extended for two years with the $3,000 refundability threshold established in the Recovery Act. This extension will ensure an ongoing tax cut to 10.5 million lower income families with 18 million children.

Earned Income Tax Credit: The Recovery Act included an expansion of the EITC worth, on average, $600 in additional assistance to families with 3 or more children. It also helped working married families by reducing the marriage penalty in the EITC. Continuing this tax cut for two years will benefit 6.5 million working parents with 15 million children.

American Opportunity Tax Credit: The Recovery Act included a new, partially refundable tax credit of up to $2,500 to help students and their families cover the cost of college tuition. This deal fully extends AOTC for two years, ensuring that more than 8 million students will continue to receive this tax benefit to help them afford college.

A 2-year extension of the R&D tax credit and other tax incentives to support business expansion.

I'd like to see everyone pay their fair share of taxes but if the trade off is providing two more years of Bush era tax cuts for the wealthy in exchange for all of the benefits for the unemployed, the middle class and low income individuals and families, then I say let the Republicans have their tax cuts. Of course I also say remind the American public of it repeatedly over the next two years. 

Let's also be clear that the Democrats in the Senate do not have the votes to end debate on the tax cuts legislation and move to a vote on the merits. They tried to do so twice and were seven votes short of the needed 60 votes each time.  People whom I like keep insisting that the president caved and never threatened the Republicans with the power of his veto. That's such a none argument; the Republicans are aware that the President can veto any bill; they are also aware that they have the authority, with sufficient votes in each chamber, to over turn that veto. 

I just watched an episode of The Last Word where some earnest young man talked about the President mounting the bully pulpit and shaming the Republicans into voting against extending the tax cuts for the wealthy. When I finished laughing, I listened to host Lawrence O'Donnell ask the youngster to give a single example where any modern president had been able to shame the Republicans into supporting any tax increase. The young man sputtered but he never came up with an answer.

The minimal benefit to the economy to be gained from collecting more taxes from the wealthy is more than offset by the benefits that this compromise provides to the poor, the unemployed , and the middle class. Without the compromise, as of December 31, 2010, the EITC, the AOTC, and the Child Tax Credit will expire. Unemployment Insurance Benefits have already expired for millions of Americans and that number will increase at the end of the year. The income tax rate for those at the bottom of the tax schedule will increase from 10% to 15%.

A good friend continues to argue that we would simply return to the middle class tax rate of the Clinton era and that it wouldn't be that bad. The problem with that logic is this isn't the Clinton era; we're in a recession. People have less disposable income than they had under Clinton. During the Clinton years, the government built up a surplus which the Bush administration morphed into a deficit. In addition, that even if the middle class manage to struggle on, what about the unemployed and the low wealth families depending on the tax credits? 

Playing Russian roulette with millions of Americans' economic welfare simply to shaft the wealthy and teach the Republicans creates an unacceptable level of collateral damage.


tnlib said...

Thanks for the reality check. As always I can come here for a calm and reasoned approach - a welcome relief from all the hysterics.

tnlib said...

I put a link on my FB with this comment:

"I can always depend on Sheria presenting very calm, highly intelligent and clear analysis in the midst of angry hysterics. She is a gifted attorney and more often than not she cuts to the chase with nothing but the facts."

Nance said...

" unacceptable level of collateral damage." That makes very good sense. I appreciate the reasoning and I'll use it medicinally to calm the car alarm going off in my head and the volcanic eruptions in my stomach.

When the European-level cuts come at us in January, it's going to take huge doses of SOMETHING for all of us. I cannot blame the progressives for screaming; I fear there's a freight train barreling right toward us all, and not even the best and brightest...among whom I count Mr. Obama...believe we can prevent it.

Infidel753 said...

Yes! I'm frankly astonished at how many people seem to think the Democrats should just kill the whole deal and let all the people who depend on unemployment benefits fall into utter poverty to make a point. It's prizing ideological purity over actually getting things done.